Tuesday, November 22, 2011

During
the third quarter of 2011, the Brookings Institute released its most recent MetroMonitor which tracks the recession and
recovery in the 100 largest metropolitan areas in the United States. Here
are some of the highlights. Please note that the economic indicators are
current to the end of the second quarter of 2011 except where I note otherwise.

The
report opens by noting that various economic indicators show that the American
economy has stalled. The national unemployment rate remains at an
elevated rate of 8.3 percent, especially when one considers that this is
supposed to be the second year of a so-called "recovery". Here is a graphshowing how elevated the unemployment rate is
compared to rates over the past 10 years showing just how America's employment
situation has not improved meaningfully since early 2009:

House prices, construction and sales remain very weak and wages are lower
than they were last year at this time. All of this does not particularly
bode well for Americans, particularly as it certainly appears that another
recession is just around the corner. Now, let's go back to the findings
of the MetroMonitor and focus on how the economic recovery is impacting life in
metropolitan regions of the United States.

Here
is a chart showing which 20 metropolitan areas are performing well and which 20
are performing poorly:

Here
is a map showing the strongest 20 metropolitan areas in dark blue dots and the
weakest in dark orange dots ranked on a combination of four factors including
changes in the unemployment rate from June 2008 to June 2011, percentage change
in gross metropolitan product, percentage change in the housing index and the
percentage change in jobs (the last three factors are measured by comparing
data from June 2011 to the peak quarter):

Notice
the concentration of orange dots in the sunbelt areas (generally) and the
concentration of dark blue dots in the northeast states, the Great Lakes area
(excluding the automotive manufacturing centres) and the Texas/Oklahoma oil
producing regions.

You
will notice that most of the metropolitan areas that suffered the least since
2008 have economies that rely on either government (i.e. Washington, D.C. and
other state capitals), education (i.e. Boston) or the energy industry (i.e.
Dallas, Houston, Oklahoma City). I guess that high oil prices really did
benefit some parts of America! The metropolitan areas that continue to
suffer the most are those related to automobile manufacturing (i.e. Detroit) or
those that suffered a large magnitude housing market bust (i.e. Las Vegas,
Phoenix, and most of California and Florida). Most of the strongest
performing metropolitan areas saw an increase in government employment, the
exact opposite scenario to what was experienced in the weakest metropolitan
areas which saw a loss of government jobs.

Now
let's look at how well the nation's metropolitan areas are recovering.
Here is a chart showing the strongest 20 recovering metropolitan areas
and the weakest 20 recovering metropolitan areas:

Here
is a map showing the same data:

The
strongest recovery is clearly noted in Texas and its neighbouring oil-rich
states. As well, the states around the Great Lakes are recovering well
with the recent increases in the production of both automobiles and durable
goods. That said, the economic performance of many of these manufacturing
centres is still well below what it was prior to the Great Contraction.
The recent resurgence in the technology sector has been kind to metropolitan
areas including Boston, Worcester, Portland, Rochester, Hartford and San Jose.

The
weakest recovery is noted in areas where real estate was hardest hit, most
particularly, the parts of America that get the warmest temperatures and the
most sun. It was these areas that experienced a massive upward and equally
massive downward swing in housing prices.

Now
let's take a more detailed look at the unemployment statistics for America's
metropolitan areas. The Bureau of Labor Statistics breaks down the United
States into 372 metropolitan areas. The unemployment data for December
2011 shows that 235 metropolitan areas have unemployment rates that are lower
than the national average of 8.5 percent and 137 metropolitan areas that have
unemployment rates that are higher than the national average. In fact,
there are 66 metropolitan areas (or 18 percent of the total) that have U3 unemployment rates that are in
excess of 10 percent as shown here:

Of
the 49 metropolitan areas with a population of 1 million or more, Las Vegas has
the highest unemployment rate of 12.7 percent. The good news is that the
September 2010 unemployment rate in Las Vegas was a breath-taking 15.6 percent
so, perhaps there is a glimmer of hope.

To
put all of this data into perspective, employment has rebounded from its Great
Recession low point in 92 of the 100 largest metropolitan areas by the second
quarter of 2011, however, only 16 gained back more than half of the jobs that
they lost between their pre-recessionary peak and their post-recessionary low
point and only four (El Paso, McAllen, Austin and San Antonio) made a complete
recovery by the second quarter of 2011. Unfortunately, eight metropolitan
areas had not recovered any of the jobs that they had lost since their
employment peak; Augusta, Colorado Springs, Des Moines, Kansas City, Lakeland,
Palm Bay, Richmond and Riverside are the unfortunate communities where
employment still lags.

Lastly,
let's take a brief look at housing prices in America's major metropolitan
areas. Here's a screen capture showing the changes in theFederal Housing Finance Agency's House
Price Indicesfor the top 50 metropolitan areas in the United States for the third quarter
of 2011:

Notice
that only 18 out of all 308 metropolitan areas have year-over-year house price
increases, most of them well less than 1 percent.

Now
here are the bottom 50 metropolitan areas with the largest year-over-year price
decreases (middle column of data):

Notice
that many of the sunnier climes are still suffering from year-over-year house
price decreases in excess of 10 percent and most recent quarterly price
declines in excess of 7 percent. This shows us that the real estate
market is far from turning around, likely due to a hefty oversupply of
foreclosures. Over a five year
period, there are 10 metropolitan areas with price decreases in excess of 50
percent, mainly in Florida, California and Nevada where the city has seen a 5 year price decline of 59.46 percent.

When you assimilate all of this data, it becomes quite clear
that, unfortunately, for those who live in Metropolitan America, the Great
Recession is far from over. Housing and employment show no signs of
returning to their pre-recessionary levels despite massive intervention by the
Federal Reserve and massive stimulus by the Obama Administration. The
trillions spent have gone somewhere but they certainly have not benefited those
who live on the tree-shaded streets of Metropolitan America.

7 comments:

It is very sad that after so much new debt under President Obama (3 Trillion) and the build-up in spending under former President Bush, we are now at a crossroads. Without new leadership, we are at increasing risk of a financial collapse.

If we do not soon take concerted action to reduce the amount of debt or at least immediately stop incurring new Federal debt ( debt ceiling increases),then we do risk a bond market crisis.

Such a crisis has already hit Italy, Portugal, Spain, Greece, Ireland, and others in Europe. The bond markets will eventually stop buying U.S. Debt. Unable to roll-over old debt would mean MUCH higher interest rates (2X). The result would deceimate real estate values and stocks and bonds, as well. U.S. BANKS would come under severe financial stress and banks failures would rival the Great Depression of the 1929-1930 period.

The US will never default and will never have any trouble selling it's debt because we have a printing press, Greece/Italy etc do not. The fed will buy any and all through proxy if needed to keep the game rolling.

The Fed is already buying through proxy, but it is a shell game. The chick's always come home to roost, ALWAYS. You can't dig your way out of a hole, you can't borrow your way out of debt. The crisis we face will make the Great Recession, and the Great Depression look like mild economic slow downs. We have too many people eating at the government table, retiring at the government utter, and President's "take from the rich and give to the poor" silly fantasy only works until the rich fear and move their money out of the country, they stop paying taxes, investing and the real bubble collapses. If oBAMa is re-elected it will happen by December of 2012, if he is not it depends on how the newly elected plan to deal with debt and entitlement, it will buy us a few months maybe years. If we do not deal with debt and entitlement, well, let's just say I'm glad I'm debt free and have property to farm. Produce will be the currency of the future.

Keep on dreaming: On a GDP per capita basis, the USA is merely number 10 according to IMF and World Bank, the CIA rates the USA number 12. The USA hasn't been number 1 in a decade, and that is a conservative estimate.

I haven't had a chance to review the entire article, as I just came across your blog today, but I did note one error that may or may not affect the premise of your article. If you carefully read through the BLS Regional and State Employment Survey, from which you extracted your second graph above, Table D, you will see that it does NOT represent the number of unemployed, but the number of jobs. I'm assuming that you know that the BLS monthly reports come from two different sources. The unemployment rates come from the Current Population Survey, which is prepared for the BLS by the Census and is a survey of families and individuals. The monthly jobs numbers come from the Establishment Survey which comes from numbers of jobs reported by the various employing companies and agencies.Table D, therefore, shows increases in numbers of jobs in those particular states between October 2010 and October 2011.

Yes, many metropolitan areas are still hurting, but the only states that suffered a year-over-year loss in jobs between October 2010 and October 2011 are Georgia (largest number of jobs lost), Indiana, Missouri, Delaware, and Arkansas.

I trust your data, but disagree with your conclusion, "The trillions spent have gone somewhere but they certainly have not benefited those who live on the tree-shaded streets of Metropolitan America."

What do you think would have happened if we hadn't invested that money in America and America's companies? Do you think non-intervention and market forces would have provided a better outcome? What would have happened if two of the big three really did go bankrupt?

Yes, we need cuts. EVERYWHERE. Not just in domestic spending and entitlement programs. We need military cuts as well. But debt is not what is holding this country back or causing high unemployment. It is lack of consumer demand that is the problem. Consumer demand is down because companies are less likely to hire and consumers are much more likely to save.

I live in Metro Detroit, and for me, the recession is over. Yes, there are still people hurting, but the fact is, things are getting better. Sometimes it feels like the Right is hoping for failure because it would be politically good for them.

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About Me

I have been an avid follower of the world's political and economic scene since the great gold rush of 1979 - 1980 when it seemed that the world's economic system was on the verge of collapse. I am most concerned about the mounting level of government debt and the lack of political will to solve the problem. Actions need to be taken sooner rather than later when demographic issues will make solutions far more difficult. As a geoscientist, I am also concerned about the world's energy future; as we reach peak cheap oil, we need to find viable long-term solutions to what will ultimately become a supply-demand imbalance.